want to covertly confiscate another’s wealth?

It is grossly irresponsible for the baby boom generation

 to expect [...]]]> Why would some of one generation

want to covertly confiscate another’s wealth?

It is grossly irresponsible for the baby boom generation

 to expect Generations X and Y

 to be saddled with our national debt,

 our trade debt, and our infrastructure debt,

and the retirement debt created by baby boomers

enjoying long retirements supported by future tax increases

on their children.

Rob Atkinson

The Atlantic

If workers earn, pay taxes, spend, save and invest,

while retirees divest, downsize, budget

and draw income and healthcare benefits, 

what’s going to happen when more retirees want

what fewer workers may not be able to deliver?

Are Baby Boomers going to get more or less than they think

if the supply of what they want to sell exceeds demand,

as they exchange assets for needed goods and services

at relatively the same time?

Loss is nothing else but change,

 and change is Nature’s delight.

Marcus Aurelius Antoninus Augustus

Roman Emperor

borrowed money from the Social Security trust fund

 to finance government operations.

 If it is no [...]]]> The Treasury Department has for decades

borrowed money from the Social Security trust fund

 to finance government operations.

 If it is no longer able to do so

 it could be forced to borrow an additional $700 billion

 over the next decade

 from China, Japan and other investors

“Over the past 25 years,

 the government has gotten used to the fact

 that Social Security is providing free money

to make the rest of the deficit look smaller.” said Andrew Biggs

a resident scholar at the American Enterprise Institute

 “Now they’ve essentially got to pay their own way

 at least a little more fully…”

“Instead of Social Security subsidizing the rest of the budget,

the rest of the budget will have to subsidize Social Security.”

Recession Puts a Major Strain On Social Security Trust Fund

As Payroll Tax Revenue Falls, So Does Surplus

Lori Montgomery

Washington Post

If Bernard Madoff

distributed money received from new investors to older investors,

until there wasn’t enough money to continue,

 does Social Security operate under the same structure

with mandatory participation?

If a private financial institution

 were as reckless with its fiduciary responsibility

 as Congress has been with Social Security and Medicare,

 there would be howls of indignation, demands for regulation

 and calls for the resignation and prosecution of those responsible.

Arnold Kling

Was it justifiable for the baby boom and their elders

to promise themselves tens of trillions of unfunded benefits

like Social Security, Medicare and Medicaid,

for future generations to pay for?

…”It is very important for the credit standing of the United States that the Congress considers very carefully what the fiscal commission proposes,” John Chambers, chairman of S&P’s sovereign rating committee, was quoted as saying.

“It is very important for Congress to take the [...]]]>

The United States government needs to take steps to preserve its top AAA-rating…

…”It is very important for the credit standing of the United States that the Congress considers very carefully what the fiscal commission proposes,” John Chambers, chairman of S&P’s sovereign rating committee, was quoted as saying.

“It is very important for Congress to take the required steps.”

S&P…has repeatedly warned about the gigantic deficit and the debt burden in the world’s biggest economy, calling it a challenge for the government.

…the U.S. does not have unlimited fiscal flexibility and the best-case scenario for the U.S. would be for its debt-GDP ratio to peak at around 80 percent, although there was a chance it could exceed 100 percent.

…On Tuesday, S&P cut Ireland’s long-term rating by one notch to ‘AA-’, the fourth highest investment grade, and assigned the country a negative outlook saying the cost to the government of supporting the financial sector had increased significantly.

Reuters

I have been keeping an eye on the monthly numbers for the Social Security Trust Fund…

…There was no logical explanation for the continued drop in YoY payroll tax receipts.

Two important sources have “explained” this drop. Both the SSTF [Social Security Trust Fund] and the CBO [Congressional Budget Office]have confirmed that [...]]]>

We Lost Track of $25 Billion?

I have been keeping an eye on the monthly numbers for the Social Security Trust Fund…

…There was no logical explanation for the continued drop in YoY payroll tax receipts.

Two important sources have “explained” this drop. Both the SSTF [Social Security Trust Fund] and the CBO [Congressional Budget Office]have confirmed that somehow there was a miscount over at Treasury for $25-29 billion.

Receipts from social insurance taxes
are also expected to decline this year
by $29 billion (3.2 percent) from last year,
mostly because of an adjustment by the Treasury
to correct for the allocation of receipts in earlier years.

The explanation from the CBO

 
    The estimated decline in trust fund income from 2009 to 2010
is due to the economic recession
and to an expected $25 billion downward adjustment to 2010 income
that corrects for excess payroll tax revenue
credited to the Trust Funds in earlier years.

The explanation from the SSTF

 …This is not supposed to happen. In the monster numbers the government tosses around this is not a big deal. But $25b is still a lot of dough.

…There is not an adequate explanation of what has happened. What the hell does “earlier years” mean? (Note the common language by both CBO and SSTF)

…this money was invested in Special Issue Treasury securities. It earned interest on those securities. So Treasury created the $25b and gave it to the TF in cash, then the TF invested it back with Treasury. But there was no money. It was a double count. One would have thought that Treasury actually balances and confirms its cash accounts from time to time. This gets back to the question how long this error has been going on.

-In my opinion the SSTF has misrepresented its financial condition to the public and to Congress for more than eleven months. Faced with an embarrassing $25billion restatement what do they do? They bury the loss. They have artificially reduced reported monthly payroll tax receipts by approximately $2b per month for all of 2010.

That is not how a loss of this magnitude should be handled. A public announcement and a one-time loss would have been the appropriate way to account for it.

…If a public company played fast and loose with top line earnings to obfuscate a bottom line loss there would be hell to pay. The market would take the stock out in the woods and shoot it. The SEC would fine them 10% of what they hid. The press would have a field day and anyone near the cover up would be forced to resign. But this is D.C.

Bruce Krasting

Has the federal government become its own special interest group?

Do government and big business often work together in ways that hurt consumers and investors?

Those who identify with the government on two or more questions are defined as the political class…

Before the financial crisis [...]]]> …Whose judgment do you trust more:
that of the American people or America’s political leaders?

Has the federal government become its own special interest group?

Do government and big business often work together
in ways that hurt consumers and investors?

Those who identify with the government on two or more questions are defined as the political class…

Before the financial crisis of late 2008, about a tenth of Americans fell into the political class,
while some 53% were classified as in the mainstream public.

The rest fell somewhere in the middle.

Now the percentage of people identifying with the political class
has clearly declined into single digits,
while those in the mainstream public have grown slightly.

A majority of Democrats, Republicans and independents all agree
with the mainstream view on Mr. Rasmussen’s three questions.

“The major division in this country is no longer between parties
but between political elites and the people,”

Scott Rasmussen

His recent polls show huge gaps between the two groups.

While 67% of the political class believes the U.S. is moving in the right direction,
a full 84% of mainstream voters believe the nation is moving in the wrong one.

The political class overwhelmingly supported the bailouts of the financial and auto industries,
the health-care bill, and the Justice Department’s decision to sue Arizona
over its new immigration law.

Those in the mainstream public just as intensely opposed those moves…

…”[Obama] kept citing Congressional Budget Office projections
that his [healthcare] plan would save money and cut the deficit…:
60% thought it would raise the deficit
and 81% thought it would cost more than CBO projected.”…

…”This will be the third straight election
in which people vote against the party in power,”…

Scott Rasmussen

John Fund
Wall Street Journal

If Gazelles need water and grass,
and Cheetahs need water and Gazelles,
and an abundance of sustenance leads to more Gazelles,
should more Gazelles and water lead to more Cheetahs?

If too many Gazelles relative to water and grass lead to fewer Gazelles,
do fewer Gazelles  =  fewer Cheetahs?

If Cheetahs and Gazelles were people,
who would be who?

George Hartzman

A massive Keynesian spending program has misallocated capital and set the stage for a crisis.

…there is mounting evidence that Beijing has misallocated vast amounts of capital, touching off a real-estate crisis that could yet drag the world’s second-largest economy down to earth.

When the global marketplace went into meltdown mode two years ago [...]]]>

China’s Looming Real-Estate Bubble

A massive Keynesian spending program has misallocated capital and set the stage for a crisis.

…there is mounting evidence that Beijing has misallocated vast amounts of capital, touching off a real-estate crisis that could yet drag the world’s second-largest economy down to earth.

When the global marketplace went into meltdown mode two years ago and Chinese exports dropped off, Beijing mounted a stimulus several times bigger relative to the size of its economy than in this country. It announced a four trillion yuan ($586 billion) stimulus for infrastructure projects and housing developments. Some of the stimulus was used to encourage local governments to lend money to state-owned companies to develop housing complexes, roads and bridges, on the theory that these are big employment generators because they boost heavy manufacturing—steel, cement—and other sectors of the economy.

Beijing also lowered capital reserve requirements for its state-owned banks ordering them to dole out loans to “support growth.” Though official data are unreliable, in 2009 Beijing apparently handed out somewhere close to 10 trillion yuan in new loans—more than twice the year before—and expanded the country’s total loan portfolio and money supply by one-third…

…Fueled in part by this massive injection of liquidity, housing prices that had started dropping due to the recession began to soar again. Over the past year they increased nearly 12%, according to the latest figures from China’s National Bureau of Statistics. So many middle-class Chinese (especially young couples wishing to move out of their parents’ home) are being priced out of the market that their travails became the subject of a popular TV series called “Dwelling Narrowness.” Beijing banned the show, fearing it would cause unrest.
 
…almost 25% to 30% of private commercial and housing stock in China is vacant. Entire cities, such as Ordos in inner-Mongolia, erected literally from scratch, stand empty.

“Chinese treat homes like gold bars buying multiple units as a store of value,” notes Mr. Chovanec. Chinese avoid the stock market because it is still volatile and risky, and banks and bonds offer a low yield. Hence, Chinese are content to buy homes and let them sit because, thanks to the absence of property taxes, holding costs are negligible. Having never experienced a housing slump since China privatized its housing market in the 1990s, they believe that home prices only rise…

…backers of China’s stimulus believe there won’t be any serious economic downside when the bubble bursts…

…While Chinese homeowners are not generally leveraged, those who buy second homes do finance them. And developers, including local governments and state-owned companies, are massively leveraged. This poses a big problem—Shen Minggao, Citigroup’s Hong Kong-based China economist, estimates in Bloomberg Businessweek that at least 2.4 trillion yuan of the stimulus is already in nonperforming loans.

China’s autocrats understand that they have a bubble on their hands. They’ve mandated minimum down payments of 50% on second homes and are considering property taxes to rein in speculative purchases. However, this will mean that the houses put on the market will find fewer buyers.

Beijing is in a dilemma. It can cut spending and rein in its monetary expansion, releasing over time capital for more productive endeavors (especially if it opens up hitherto closed investment options) and putting the economy on a healthier footing. However, that would mean slower growth, lower home values, rising unemployment and potential political unrest. Alternatively, it can buy a few more years of faux-growth and stability by propping up the real-estate market—and risk making the day of reckoning far worse when it arrives…

…Pouring liquidity into real estate is the Keynesian equivalent of digging ditches and filling them with stones…

Shikha Dalmia and Anthony Randazzo
Reason Foundation
Wall Street Journal

Congressman Markey’s subcomittee…got the Food and Drug Administration to admit that fish are not being tested from oiled areas…

The FDA also admitted that it is not testing for mercury, arsenic or [...]]]>

FDA Not Testing Gulf Seafood for Mercury, Arsenic or Other Heavy Metals Because “We Do Not Expect to See an Increase Based on this Spill”

Congressman Markey’s subcomittee…got the Food and Drug Administration to admit that fish are not being tested from oiled areas…

The FDA also admitted that it is not testing for mercury, arsenic or other toxic heavy metals, because – wait for it – the FDA doesn’t expect to see an increase of these toxins from the oil spill…

The FDA’s statement is similar to NOAA Administrator Jane Lubchenco’s recent assertion that oil doesn’t bioaccumulate in fish, and that fish naturally “degrade and process” the oil.

The FDA also admitted that it is not testing for the most toxic bioaccumulating metabolites of polycyclic aromatic hydrocarbons.

George Washington
via Tyler

…the federal government’s Financial Crisis Inquiry Commission held hearings as part of their continuing investigation into the causes of the acute economic meltdown which occurred in late summer 2008. 

…The individuals questioned by the commission mostly seem to be diverting blame for the whole fiasco to someone else.

…The reality is that the [...]]]>

The FCIC: Passing the Buck

…the federal government’s Financial Crisis Inquiry Commission held hearings as part of their continuing investigation into the causes of the acute economic meltdown which occurred in late summer 2008. 

…The individuals questioned by the commission mostly seem to be diverting blame for the whole fiasco to someone else.

…The reality is that the Federal Reserve relentlessly expanded the money supply through artificially low interest rates for over two decades, and this expansion of easy money caused a wholly predictable bubble.  To a myopic Keynesian regulator, the bubble may appear to be caused by greed, but in truth it is completely predictable that humans will act in their own perceived self interest. 

…We can condemn this as greed, but the fundamental problem is Fed policy itself.  There will always be demand for cheap money, but we should not allow the Fed to debase our currency and create bubbles of false prosperity to satisfy that demand.

What the commission really needs are experts who understand free market economics rather than big government Keynesian fantasies.  The commission has none of these, and has called no true free market witnesses.  That perspective would only distract from their predetermined goals.

The commission will bemoan the complexity and inscrutability of our economic problems, but the solution is simple: allow freedom to operate in our markets.  Allow U.S. financial, labor, and housing markets to normalize without political interference. 

Though solution is simple…,It would require admitting fiat money is a tangled web of monetary deception prone to catastrophic failure.  It would require allowing Americans to choose a system of sound money, where the money supply and interest rates are set by market forces rather than centralized economic planners. 

Unfortunately, fiat money is like a drug to a Congress hopelessly addicted to spending vastly more than the Treasury collects in revenues.  Because of this, our problems can only get worse and more complex before they get better.

Congressman Ron Paul